Revised budget includes cooking oil subsidy

The Jakarta Post , Jakarta | Wed, 08/29/2007 1:47 PM | Business

Urip Hudiono, The Jakarta Post, Jakarta

A plenary session of the House of Representatives approved Tuesday the midyear revisions to the 2007 budget, which see a downsizing in anticipated government revenue and spending, a wider deficit, additional funds for bureaucracy reform, and a new cooking-oil subsidy.

The subsidy, which is intended to shield poor households from the effects of higher cooking oil prices, will amount to Rp 325 billion (US$36 million), while the additional money earmarked for helping fix up the government bureaucracy -- mostly in the form of pay rises in the Finance Ministry -- comes to Rp 1.46 trillion.

The revised budget also sees a bigger subvention for state-power firm, PLN, at Rp 32.4 trillion, but lower fuel subsidy spending of Rp 55.6 trillion.

Legislators agreed that the two new allocations be included in this year's total government spending, which saw a 1.4 percent cut to Rp 752.4 trillion (US$83 billion).

The 2007 revised budget still sees Indonesia's economy growing by 6.3 percent, albeit with a lower end-of-year GDP of Rp 3,761 trillion.

Inflation is predicted to continue slowing to 6 percent, while the rupiah is forecast to average Rp 9,050 against the U.S. dollar, and the central bank benchmark interest rate 8 percent.

All of the House's 10 factions approved the budget revisions, subject to supplementary comments. Such comments were also entered by the Budget Committee, which had negotiated the revisions with the Finance Department

""This year's 6.3 growth should be of higher quality, in the sense that it should create at least 10.7 million new jobs, and be built on 3.3 percent growth in the agricultural sector and 8.5 percent growth in the manufacturing industry,"" Budget Committee chairman Emir Moeis said.

On the new cooking oil subsidy, the Committee urged the government to make sure that the subsidy be employed effectively, and that the progress of the program be discussed with the relevant House commissions.

The Trade Ministry had earlier said that it hoped to be able to pay up to Rp 50 billion per month on providing subsidized cooking oil to poor households under a similar scheme to the government's subsidized rice program.

Cooking oil prices have been rising in line with higher crude palm oil (CPO) prices, from which cooking oil is derived, on the back of higher global demand for the commodity. This has encouraged producers to export their palm oil rather then supply the local market. Suspected hoarding and poor distribution has further exacerbated the situation.

The government hiked the export duty on CPO in June to 6.5 percent from 1.5 percent previously to help secure domestic supplies, and plans to raise the duty again in September.

Meanwhile, the National Mandate Party (PAN) objected to the funding allocation for the bureaucracy reform program, urging that it be postponed until next year considering the current revenue shortfall.

The program involves the payment of Rp 997 billion to the Finance Ministry, Rp 393 billion to the Supreme Court and Rp 74 billion to the Supreme Audit Agency (BPK) for the funding of pilot projects.

Other legislators questioned the funding allocations for state guarantees in the power sector, for the Sidoarjo mud-volcano disaster and for the education sector.

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